A  man  in  office  without  means  must  abandon  the  hope 
of  making  the  future  of  his  family  luxuriously  com- 
fortable. All  a  man  can  do  under  existing  circumstances 
to  safeguard  his  family  is  to  get  his  life  insured. 

— WM.  H.  TAFT. 


LIFE  INSURANCE 
AND  ITS  BENEFITS 


By    HON.   WM.    H.   TAFT 

Ex-President  of  the  United  States 


WRITTEN   ESPECIALLY   FOR  THE  SPECTATOR 


COPYRIGHT,  1913,  BY 

THE  SPECTATOR  COMPANY 

NEW  YORK 


A  man  in  office  without  means  must  abandon  the  hope 
of  making  the  future  of  his  family  luxuriously  comfortable. 
All  a  man  can  do  under  existing  circumstances  to  safe- 
guard his  family  is  to  get  his  life  insured. 

— WM.  H.  TAFT. 


LIFE  INSURANCE 
AND  ITS  BENEFITS 


BY   HON.  WM.   H.   TAFT 

vv 

Ex-President  of  the  United  States 


THE  SPECTATOR  COMPANY 

CHICAGO  OFFICE:  135  WILLIAM  STREET, 

INSURANCE  EXCHANGE  NEW  YORK 


EX-PRESIDENT  TAFTS  SPLENDID  INDORSE- 
MENT OF  LIFE  INSURANCE 
TP  HE  special  article  written  for  the  Quinquennial  Number 

J  of  THE  SPECTATOR  by  Ex-President  William  H.  Taft 
should  prove  of  inestimable  value  in  spreading  the  gospel  of 
life  insurance  and  in  removing  any  distrust  in  the  system  that 
may  possibly  lurk  in  the  minds  of  the  uninformed  public.  Mr. 
Taft  is  known  to  be  a  man  of  conservative  temperament  and 
deep  sincerity.  In  a  letter  addressed  by  him  to  the  Editor, 
when  submitting  his  manuscript  of  the  article  printed  in  other 
pages,  he  wrote : 

I  hope  the  article  will  not  seem  too  long  to  you  and  will  not  be 
setting  up  too  many  elemental  principles.  I  believe  every  word  I 
have  said,  and  would  not  wish  to  write  an  article  in  which  I  did  not. 

Anything  that  Mr.  Taft  writes  about  life  insurance  is 
bound  to  i aspire  universal  confidence  and  will  be  accepted  as 
conclusive  by  millions  of  Americans.  Moreover,  Mr.  Taft 
practices  what  he  preaches.  He  now  carries  $60,000  of  life 
insurance  and  $ib,rooo  of  accident  insurance.  His  strong  and 
unselfish  sense  of  duty  is  reflected  in  the  following  paragraph 
of  his  article,  which  should  be  an  inspiration  to  his  country- 
men: 

There  is  no  cause  that  I  know  of  that  works  on  a  conscientious  man 
who  loves  his  wife  and  his  children  so  much  as  the  prospect  of  leav- 
ing them  helpless  in  the  world  and  dependent  on  others;  and  there 
is  nothing  comparable  to  the  relief  from  this  worry  that  the  in- 
strumentality of  life  insurance  offers  to  a  man  who  has  a  family  and 
who  has  only  his  brains  and  his  hands  to  support  them  from  year  to 
year,  and  who  must  regard  his  possible  death  as  the  launching  of  those 
near  and  dear  to  him  upon  a  helpless  sea  of  trouble  and  want. 

Mr.  Taft  believes  that  the  people  generally  share  his  ideas 
as  to  the  necessity  of  carrying  life  insurance  and  he  testifies 
to  that  belief  as  follows : 

It  is  to  the  lasting  credit  of  the  American  people  that  they  are 
coming  more  and  more  to  realize  the  necessity  for  life  insurance  and 
are  in  constantly  increasing  numbers  availing  themselves  of  its  benefits. 
This  fact  is  significant  of  the  love  of  home  and  family  that  charac- 
terizes the  average  American  and  of  the  sense  of  responsibility  that  is 
his  highest  domestic  virtue.  ,,  r. 


LIFE  INSURANCE 
AND  ITS 


^1^ 


BY  HON.  WILLIAM  H.  TAFT,  EX-PRESIDENT  OF  THE  UNITED 

STATES. 

(Special  Contribution  to  The  Quinquennial  Number) 

HAVE  been  asked  by  the  Editors  of  THE  SPEC- 
TATOR to  say  what  I  think  about  life  insur- 
ance, and  as  I  have  thought  a  good  deal  about 
it,  and,  for  a  man  of  very  moderate  means, 
have  invested  a  good  deal  in  it,  I  am  quite 
willing  to  say  what  I  do  think  about  it,  and 
why  I  favor  it  as  one  of  the  great  institutions 
of  modern  society. 

SECURITY  ONE  MOTIVE  FOR  SAVING 
Two  things  must  be  provided  for  in  order  to  induce  men 
who  have  made  money,  or  are  making  it,  to  save  it.  First,  they 
must  have  confidence  that,  being  saved,  it  can  be  kept  in  a 
safe  place,  so  that  they  can  have  it  when  they  would.  This 
means  not  merely  a  condition  of  law  and  courts  by  which  they 
can  enforce  the  right  of  ownership  and  recover  the  money, 
but  a  security  by  which,  without  anything  but  the  expression 
of  a  desire  for  it,  the  savings  will  be  forthcoming.  The  ma- 
chinery must  be  evident  which  will  retain  the  money  where 
the  owner  can  get  at  it  and  be  sure  to  have  it  when  he  needs 
it.  Hence,  the  enormous  use  of  the  savings  banks  for  the 
deposit,  by  the  comparatively  poor,  of  small  savings,  which, 
in  the  aggregate,  run  up  into  billions  of  dollars,  and  far  out- 
strip the  total  capital  of  the  multi-millionaires  whose  ac- 
quisitions at  times  give  so  much  concern  to  public-minded 
citizens. 

*  Copyright,  1913,  by  The  Spectator  Company,  New  York. 

285880. 


IN  FORM  OF  INTEREST  SECOND  MOTIVE 

In  Addition  to  the  security  of  payment,  another  element 
enters  into  the  motive  for  saving,  and  that  is  the  compensation 
paid  to  the  saver  for  the  use  of  what  he  has  saved.  In  respect 
to  this,  of  course,  the  greater  the  security,  the  less  the  interest. 
This  principle  is  exemplified  in  the  operation  of  the  postal 
savings  banks  which  have  just  been  established  in  the  United 
States,  though  they  long  had  proved  useful  in  foreign  coun- 
tries. The  postal  savings  bank  is  an  institution  to  stimulate 
saving  on  the  part  of  those  who  will  trust  no  one  except  the 
government.  They  will  trust  no  bank,  and  unless  they  can 
secure  government  guaranty  of  return  they  will  save  their 
money — when  they  save  it — by  carrying  it  on  their  persons, 
or  by  concealing  it  about  their  houses.  As  this  is  rather  an 
unsafe  method  and  frequently  results  in  loss,  it  fails  to  stim- 
ulate savings  as  does  the  security  offered  by  the  government 
in  a  postal  savings  bank.  The  succession  of  events  in  the  use 
of  postal  savings  banks  is  instructive.  After  the  ignorant 
foreigner,  who  trusts  only  the  government  and  with  whom 
security  is  of  sole  importance,  has  made  deposits  in  the  postal 
bank,  he  begins  to  learn,  by  the  receipt  of  two  per  cent  a  year 
on  his  money,  that  there  is  some  virtue  in  interest ;  and  study- 
ing the  question  more,  he  learns  that  he  can  secure  greater  in- 
terest at  a  savings  bank,  and  this  leads  him  to  risk  something 
in  security  to  increase  his  returns,  and  so  he  becomes  a  de- 
positor in  the  savings  bank. 

WORLD'S  CAPITAL  CHIEFLY  MADE  UP  OF  SMALL  SAVINGS 

These  plain  statements  of  fact  that  I  have  just  made  are 
commonplace  and  prosaic  enough,  and  yet  it  is  necessary  to 
formulate  them  in  order  to  bring  home  to  the  ordinary  citizen 
what  so  frequently  escapes  him  in  dealing  with  economic  ques- 
tions— that  the  capital  of  the  world,  upon  which  the  business 
of  the  world  is  done,  and  which  grows  apace  from  year  to 
year  and  is  represented  in  new  railroad  construction,  enlarged 

6 


industries,  manufactures,  agricultural  production  and  all 
forms  of  commercial  progress,  is  not  chiefly  made  up  by  the 
aggregation  of  a  comparatively  few  large  contributions  from 
the  so-called  capitalists  and  bankers  of  the  world,  but  it  is 
made  up  far  more  through  these  innumerable  agencies  for 
saving  the  small  deposits  of  the  multitude. 

LIFE  INSURANCE  A  MOST  IMPORTANT  INSTRUMENT  IN  AMASS- 
ING SMALL  SAVINGS  AND  APPLYING  THEM  AS  CAPITAL 

Life  insurance  is  a  somewhat  more  complicated  and  intri- 
cate machine  for  saving,  but  one  which,  in  its  way,  is  grow- 
ing to  be  as  important  as  the  savings  bank.  Life  insurance 
presents  peculiar  advantages  in  securing  a  great  amount  of 
comparatively  small  savings  by  one  of  the  largest  classes  in 
our  social  structure.  I  refer  to  the  professional,  salaried  and 
skilled  labor  classes. 

PERMITS  A  TRANSMUTING  OF  ONE'S  PROFESSIONAL  SKILL 
INTO  MONEY 

The  simple  life  insurance  contract,  by  which,  in  consider- 
ation of  the  payment  of  a  fixed  sum  per  year  during  the  life 
of  the  insured,  the  company  agrees,  at  the  end  of  that  life,  to 
pay  the  representative  or  family  of  the  insured  a  certain  sum, 
is  really  a  plan  by  which  the  insured  transmutes  into  money,  , 
to  be  paid  at  his  death,  a  certain  part  of  the  value  of  his  skill,  I 
experience  and  professional  knowledge.  Take  a  physician, 
who  spends  all  the  time  of  his  life  until  he  is  twenty-five  in 
preparing  himself  for  his  profession.  During  the  next  forty- 
five  years  certainly  he  must  earn  all  that  he  possibly  can,  not 
only  to  enable -him  to  live  during  that  forty-five  years  and 
bring  up  a  family,  but  also  to  accumulate  something  to  rep- 
resent the  value,  as  capital,  of  that  which  he  spent  his  youth  [/ 
and  young  manhood  to  acquire  in  the  way  of  professional  skill. 
Suppose,  now,  that  instead  of  living  to  be  seventy,  he  dies  at 
thirty-five;  then  he  has  lost,  and  his  family  have  lost,  that 


potentiality  of  earning  a  handsome  income  during  thirty-five 
years  that  would  have  been  his  had  he  lived  to  the  age  of  the 
Psalmist.  But  by  sharing  a  part  of  his  annual  income  in  pre- 
miums for  life  insurance  he  secures  the  opportunity  to  appro- 
priate to  the  use  of  his  family  a  partial  money  equivalent  of 
his  professional  skill  and  experience  for  the  probable  length 
of  his  life,  even  though  his  life  may  be  prematurely  ended. 
The  same  thing  is  true  of  the  salaried  teacher,  the  salaried 
man  engaged  in  any  clerical  or  other  skilled  work,  whether  his 
income  be  called  salary  or  wages. 

INSURANCE  GIVES  ONE  MAN  THE  BENEFIT  OF  THE  AVERAGE 
LIFE  OF  MANY  HEALTHY  MEN 

The  insurance  company,  because  it  has  a  very  large  number 
of  risks,  by  proper  medical  examination  can  exclude  bad  risks 
and  fix  the  premiums  to  be  paid  so  as  to  reduce  the  probability 
of  loss  on  all  the  risks.  In  other  words,  the  company  averages 
and  neutralizes  the  losses  from  the  short-lived  by  the  pre- 
miums received  from  the  longer  lives  of  others  similarly  situ- 
ated. The  insured  may  thus  acquire,  through  this  adjustment 
by  the  insurance  company,  the  benefit  in  money's  worth  of  the 
average  chance  of  life  of  a  large  class  of  healthy  men  similarly 
situated.  If  a  man  lives,  the  more  he  contributes  to  his  life 
insurance,  the  less  it  costs  him  per  year,  because  the  greater 
the  dividends  he  will  receive  from  the  profits  of  the  company 
itself,  assuming  that  it  is  a  mutual  company,  as  many  of  the 
modern  companies  are. 

INSURANCE  ONE  OF  GREAT  BENEFITS  OF  MODERN  SOCIETY 
FOR  PROFESSIONAL  AND  SALARIED  MEN  AND  WAGE- 
EARNERS 

I  regard  the  opportunity  that  professional,  salaried  and 
skilled  labor  men  have  to  invest  in  life  insurance  as  one  of 
the  great  benefits  of  our  modern  society.  I  would  not  mini- 


mize  the  advantage  of  life  insurance  to  capitalists  and  busi- 
ness men,  by  insurance  in  various  forms  of  policies,  to  make 
up  for  the  possible  losses  they  may  suffer  in  their  ordinary 
investments  and  business,  but  I  am  discussing  the  phase  of 
life  insurance  that  comes  home  to.  me  with  the  greatest  force. 

CHIEF  BENEFIT  OF  INSURANCE  CONTRACT  ITS  DURESS-WIELD- 
ING EFFECT  TO  COMPEL  SAVINGS 

The  most  beneficial  feature  of  life  insurance  seems  to  me  to 
be  the  duress  that  the  terms  of  the  contract  exercise  over  the 
policyholder  to  save.  No  matter  how  long  he  lives,  the  terms 
of  the  contract  are  such  that,  with  the  penalty  of  forfeiture 
for  non-payment  of  premiums  before  each  holder  of  a  policy, 
he  will  strain  every  nerve  and  resort  to  every  honorable  re- 
source to  have  the  money  ready  upon  the  day  appointed  to 
meet  his  annual  premiums.  It  is  this  sense  of  obligation, 
stronger  than  any  I  know  in  our  commercial  and  business 
world,  that  makes  life  insurance  so  useful  to  the  great  ma- 
jority of  those  who  resort  to  it  and  assume  its  burdens.  Your 
income  may  be  such  at  one  time  that  you  lightly  assume  the 
obligation.  At  another  time,  when  your  expenses  increase, 
the  burden  of  the  payment  becomes  heavier ;  but  the  very  ex- 
istence of  the  burden  is  a  restraint  upon  the  increase  of  ex- 
penses and  works  always  for  the  benefit  of  the  insured  and  his 
family. 

Of  course,  life  insurance  has  a  great  many  other  uses  than 
the  mere  provision  against  the  death  of  the  salaried  and  pro- 
fessional class,  and  it  has  a  great  many  forms  different  from 
that  of  the  straight  life  policy ;  but  they  all  of  them  necessarily 
involve  the  principle  of  saving  of  the  premiums  contributed 
for  a  long  time  and  investing  them  in  dividend-paying  invest- 
ments until  the  event  happens,  upon  which  either  the  principal 
or  dividends  are  to  be  paic}  to  the  policyholder, 


ANOTHER  BOON  OF  LIFE  INSURANCE  A  MEANS  OF  AVOIDING 

WORRY 

Life  insurance  confers  another  great  boon  upon  men  of 
small  or  no  means,  but  of  good  earning  capacity.  It  serves  to 
save  and  husband  their  nervous  vitality.  One  of  the  greatest 
causes  for  waste  in  the  exercise  of  human  energy  is  nervous 
worry.  Where  worry  only  stimulates  to  a  greater  effort  and 
more  thorough  preparation,  it  is  useful,  but  where  it  goes  far 
beyond  this  and  burns  up  nervous  vitality  unnecessarily  it  is 
waste  without  return.  There  is  no  cause  that  I  know  of  that 
works  on  a  conscientious  man  who  loves  his  wife  and  his 
children  so  much  as  the  prospect  of  leaving  them  helpless  in 
the  world  and  dependent  on  others ;  and  there  is  nothing 
comparable  to  the  relief  from  this  worry  that  the  instru- 
mentality of  life  insurance  offers  to  a  man  who  has  a  family 
and  who  has  only  his  brain  and  his  hands  to  support  them 
from  year  to  year,  and  who  must  regard  his  possible  death  as 
the  launching  of  those  near  and  dear  to  him  upon  a  helpless 
sea  of  trouble  and  want.  If,  by  provident  contribution  from 
his  annual  income,  he  can  secure,  upon  his  possible  death,  the 
immediate  payment  of  money  enough  to  enable  his  family  to 
live  and  to  keep  the  wolf  from  the  door  and  to  educate  the 
children  until  they  are  self-supporting,  then  the  burden  of 
worry  and  of  interference  with  his  peace  of  mind  and  with 
his  working  capacity  is  lifted  from  him;  he  is  in  the  happy 
frame  of  mind  and  can  say  that,  measured  by  dollars,  he  is 
more  valuable  to  his  family  dead  than  alive.  The  perception 
of  these  truths  by  a  great  number  of  people  in  every  com- 
munity is  what  explains  the  enormous  amounts  now  invested 
in  life  insurance  in  this  country. 

RIGHT  AND  DUTY  OF  THE  STATE  TO  SUPERVISE  INSURANCE 

BUSINESS 

Life  insurance  is  so  large  a  business  and  enters  so  minutely 
into  the  happiness  of  hundreds  of  thousands  of  individuals 

10 


that  the  State  may  properly  claim  the  right  to  supervise  it,  to 
impose  upon  it  restrictions  for  the  security  of  those  who  ought 
to  be  its  beneficiaries  and  may  be  its  victims,  and  by  constant 
examination  to  see  to  it  that  the  millions  and  billions  of  money 
entrusted  to  the  companies  engaged  in  this  work  are  properly 
invested  for  the  benefit  of  those  whose  faith  in  the  honesty  of 
the  company  managers  has  led  to  their  straining  every  nerve 
to  meet  the  annual  premiums  on  the  policies  which  they  have 
taken  out.  *  *  * 

PUBLIC  REALIZES  NECESSITY  OF  LIFE  INSURANCE. 

It  is  to  the  lasting  credit  of  the  American  people  that  they 
are  coming  more  and  more  to  realize  the  necessity  for  life  in- 
surance and  are  in  constantly  increasing  numbers  availing 
themselves  of  its  benefits.  This  fact  is  significant  of  the  love 
of  home  and  family  that  characterizes  the  average  American, 
and  of  the  sense  of  responsibility  that  is  his  highest  domestic 
virtue. 

In  the  last  five  years  the  growth  of  the  total  life  insurance 
business  of  the  country  has  been  phenomenal.  The  new  busi- 
ness written  and  paid  for  in  1907  amounted  to  $1,939,000,000, 
as  against  $2,887,000,000  in  1911,  while  the  business  paid  for 
in  1912  was  $3,232,871,138.  At  the  close  of  1907  there  was  in 
force  $14,080,000,000  of  ordinary  and  industrial  life  insurance 
in  the  United  States.  Four  years  later  this  had  grown  to  the 
enormous  sum  of  $18,002,000,000,  and  the  total  amount  of  in- 
surance in  force  at  the  end  of  the  year  1912  was  $19,218,263,- 
143.  Vast  as  these  sums  are,  they  represent  but  a  portion  of 
the  insurable  value  of  the  lives  of  our  citizens,  and  there  is  a 
rich  field  for  the  further  cultivation  of  savings  by  these  means. 

THE  PART  OF  THE  LIFE  INSURANCE  COMPANIES  DONE  WELL 

On  the  whole,  the  life  insurance  companies  are  doing  their 
part  in  the  evolution  of  this  great  business  with  conspicuous 

11 


ability  and  with  admirable  fidelity  to  the  trust  imposed  in  them. 
They  can  hardly  have  a  greater  responsibility.  Their  difficult 
task  is  to  guard  the  accumulated  trust  funds,  now  nearly  four 
and  a  half  billion  of  dollars,  with  the  most  scrupulous  watch- 
fulness, to  keep  them  invested  with  due  regard  to  productive- 
ness and  absolute  security,  and,  finally,  to  carry  out  with  exact 
justice  the  provisions  of  contracts  as  they  mature  from  day 
to  day  on  into  the  distant  future.  This  is  a  labor  of  the 
highest  importance  to  the  community  at  large.  They  must  be 
alert  to  detect  treachery  and  dishonesty,  within  the  company, 
and  fraud  and  conspiracies  without.  With  many  conflicting 
laws  in  the  several  States,  they  must  carry  on  their  business  in 
conformity  with  such  laws  as  best  they  may.  They  must  de- 
cide the  border  line  between  liberality  to  their  policyholders, 
in  the  matter  of  policy  provisions,  and  what  might  be  unsafe  at 
times  of  excessive  mortality  or  financial  stress. 

PLANS  OF  SOME  COMPANIES  TO  PROMOTE  GENERAL  HYGIENE 

It  appears  that  some  of  the  life  insurance  companies  are 
carrying  on  educational  plans  looking  to  the  conservation  of 
life  and  health  which  cannot  fail  to  be  of  great  practical  value 
to  the  whole  country.  Trained  statisticians  study  and  classify 
the  conditions  bearing  upon  mortality  and  disease  in  different 
sections  of  the  country  and  under  various  industrial  condi- 
tions, and,  as  a  result  of  their  investigations,  steps  are  taken 
to  improve  hygienic  regulations  in  communities  and  to  abate 
the  dangers  incident  to  unhealthy  occupations. 

UNFOUNDED  PREJUDICES  AGAINST  INSURANCE   COMPANIES 
AND  OTHER  CORPORATIONS 

There  is  a  very  strong  prejudice  against  all  corporations,  and 
this  includes  insurance  companies  and  railroad  companies.  In 
so  far  as  the  methods  of  these  corporations  have  been  properly 
subject  to  criticism  a  feeling  of  antagonism  by  the  public  is 
justified;  but  in  many  instances  and  generally  it  goes  beyond 

12 


this,  and  it  ought  to  moderate  the  feeling  much  and  restore 
a  desire  to  do  justice  to  such  corporations  to  have  it  under- 
stood what  a  large  part  of  the  money  of  insurance  companies 
represents  the  savings  of  the  many.  Thus,  there  are  20,000,- 
ooo  policyholders  in  American  life  insurance  companies  to- 
day, which  itself  speaks  for  the  number  of  poor  and  com- 
paratively poor  persons  who  are  interested  in  the  capital  and 
prosperity  of  insurance  companies.  Then  the  insurance  com- 
panies have  invested  a  large  part  of  this  capital  in  corporate 
investments.  Thus  the  insurance  companies  doing  business  in 
New  York  own  one-eighth  of  all  the  bonds  issued  by  the  rail- 
road companies  of  this  country,  and  their  ownership  of  other 
securities  of  corporations  is  equally  important.  The  signifi- 
cance of  this  should  be  brought  home  to  the  public  at  large 
in  order  to  mitigate  strong  anti-capitalistic  feeling,  which 
really  brings  about  injustice  and  tends  to  halt  prosperity. 

THE  PEOPLE  OWN  THIS  COUNTRY — NOT  THE  MILLIONAIRES 

The  people  ought  to  know  that  it  is  the  people,  after  all,  that 
own  this  country,  and  it  is  their  savings  and  their  capital  that 
run  the  great  enterprises  of  this  country,  and  not  that  of  a 
few  individuals,  and  that  legislation  intended  to  strike  at  capi- 
tal to  restrict  its  beneficial  use  by  the  people  is  a  blow  at  them- 
selves. 

TOTAL  ASSETS  OF  LEGAL  RESERVE  LIFE  INSURANCE 
COMPANIES  A  BULWARK 

At  the  end  of  the  year  1911  the  total  admitted  assets  of  the 
legal  reserve  life  insurance  companies  doing  business  in  the 
United  States  amounted  to  $4,165,148,290,  and  by  the  first  of 
January,  1913,  these  assets  had  grown  to  be  $4,404,744,039. 
This  enormous  sum,  accumulated  from  every  part  of  the  coun- 
try, and  from  all  classes  of  citizens,  is  not  only  a  bulwark 
against  future  want  and  poverty,  but  it  is  an  ever-increasing 

13 


source  of  prosperity  in  the  present.  As  it  must  be  invested 
in  order  to  carry  out  its  purpose,  it  builds  our  railroads  and 
our  factories,  finances  our  industrial  and  commercial  enter- 
prises, and  distributes  its  potent  streams  in  every  direction, 
as  irrigation  spreads  fertility  in  an  arid  land.  It  is  one  of  the 
greatest  modern  instances  of  the  power  of  a  great  people  act- 
ing together  for  good. 


14 


EX-PRESIDENT    WILLIAM   H.    TAFT    AT    YALE    UNIVERSITY 

15 


LOAN  DEPT. 


T  Tk  91  A-50w-8,'57 
^8481^0)4768 


UNIVERSITY  OF  CALIFORNIA. JJBRAR 


